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Cowen on 'Labor Econ Versus the World'

I'm Bryan Caplan, Professor of Economics at George Mason University and New York Times Bestselling author.

3 days ago

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In January, I released Labor Econ Versus the World, the first in a series of eight books of my best blog essays.  Tyler Cowen wrote a reaction piece, to which I shall now respond.

Tyler takes issue with my views on discrimination, education, and immigration. The unifying theme of his critique is that I fail to take culture seriously enough:

I would instead stress that most of the inequity occurs upstream of labor markets, through the medium of culture.  It is simply much harder to be born in the ghetto!  I am fine with not calling this “discrimination,” and indeed I do not myself use the word that way.  Still, it is a significant inequity, and it is at least an important a lesson about labor markets as what Bryan presents to you.
More generally, I believe that once you incorporate these messy “cultural upstream” issues, much of labor economics becomes more complicated than Bryan wishes to acknowledge.  Much more complicated.

Main responses:

1. Sometimes the world is complicated. Sometimes it’s simple. And the best way to understand the world is usually to figure out the simple questions first.

2. I’m happy to acknowledge that “culture matters.” And yes, labor economics if culture matters is “much more complicated” than labor economics if culture doesn’t matter. But I don’t see that this truism invalidates any of my specific claims.

3. I would consider it a great intellectual advance if people who currently worry about “discrimination” would instead say, “Free labor markets judge productivity quite fairly, but that doesn’t mean that life is fair.”

At minimum, this would end the unfair scapegoating of employers for the unfairness of the universe.  But it would also redirect intellectual attention to other causal questions, like, “How much does being ‘born in the ghetto’ actually reduce your productivity – and why?”  As well as moral questions like “Does it really make sense to accuse total strangers of committing a ‘significant inequity’ against you simply because you were born in the ghetto and they failed to help you?”

4. The examples of the “cultural upstream” that Tyler discusses in detail – Princeton admissions and Major League Baseball – are gripping but probably just aren’t very important in the broad scheme of things. Even if you broaden these categories to “elite college admissions” and “professional sports,” they’re a tiny share of the economy.

5. Furthermore, as Tyler knows, there are standard economic stories about why we should expect market checks on discrimination to be especially weak in these specific industries:

a. Elite colleges are non-profits. Unlike regular businesses, their leaders won’t get rich if they base decisions on productivity rather than prejudice. So we should not be surprised when they engage in discrimination – especially if donations have made them fabulously wealthy.  (Though to be fair to Princeton, they only “kept out Jews” in the sense that they had a 3% Jewish quota). To be honest, I am so happy to heap blame on non-profits for their discriminatory ways that I have to remind myself that even blatant discrimination may nevertheless do little damage.  American Jews prospered immensely despite Ivy League quotas, and there were elite all-women’s colleges, too.

b. In sports, the product is the worker. In most industries, employers have an easy way to mitigate consumer-on-worker discrimination: keep consumers from seeing disliked workers. That’s why governments have to require national origin labels to help xenophobic consumers practice their xenophobia.  For professional athletes and most other entertainers, however, the product you’re selling is the worker, so hiding their identity is very hard.

6. Strangely, I think it’s Tyler who underrates the power of culture. Yes, you can call colleges and sports forms of “culture.” But the standard cultural mechanism is simply in-group conformity. You grow up in a ghetto; other people in the ghetto have dysfunctional behavior; you conform; now you have dysfunctional behavior. You grow up in a low caste; other people in your caste have dysfunctional behavior; you conform; now you have dysfunctional behavior. This conformity story is emotionally unappealing, but it seems vastly more important than Tyler’s narratives about Princeton admissions or Major League Baseball.

7. Tyler has a funny parenthetical: “(I have another theory that this neglect of culture is because of Bryan’s unusual theory of free will, through which moral blame has to be assigned to individual choosers, but that will have to wait for another day!)”

My response: I’ve never claimed that moral blame “has to be” assigned to individual choosers. I certainly wouldn’t blame Jews rejected by Princeton, or great Negro League players excluded from Major League Baseball. But yes, if you’re a normal adult who conforms to a dysfunctional culture, I will probably morally blame you. “If all your friends jumped off the Brooklyn Bridge, should you?” is a great moral hypothetical.

8. When he turns to immigration, Tyler suddenly becomes strident: “Bryan for instance advocates open borders (for all countries?).  I think that would be cultural and political suicide, most of all for smaller countries, but for the United States too.  You would get fascism first, if anything.”

I have whole chapters discussing these issues in Open Borders. I’ve reviewed all the evidence that’s out there, and see no sign that these dire predictions are credible.

Since we’re talking about immigration and culture, Open Borders argues that the central reason why immigration works wonders is in fact cultural! Developed countries are great at taking immigrants from backwards, authoritarian countries and swiftly acculturating them enough to become productive members of society. And they’re even better at taking the children of such immigrants and acculturating them almost fully.

Tyler’s talk of “cultural and political suicide” just looks like dogmatic hyperbole to me. What even counts as “cultural suicide”? Does the cultural change in the U.S. from 1922-2022 count? If people from 1922 could see the modern world, I wouldn’t be surprised if many would use this hysterical phrasing. But we residents of 2022 would roll our eyes at them – and with good reason. The “fascism” prediction is similarly unhinged.

If Tyler would tone this down to, “There’s a 2% chance that open borders would lead to fascism,” perhaps we could have a fruitful conversation. Though I fear Tyler would just add that he’d gladly sacrifice a doubling of Global World Product to avoid this 2% risk.

9. Tyler appends this conciliatory line: “I do however favor boosting (pre-Covid) immigration flows into the United States by something like 3x.  So in the broader scheme of things I am very pro-immigration.”

My question for him: How would you respond to the legions of people eager to declare, “Tripling immigration would be cultural and political suicide, most of all for smaller countries, but for the United States too.  You would get fascism first, if anything”? Would you dismiss this as dogmatic hyperbole? Point to some evidence of which I’m unaware? Or what?

10. Tyler adds: “I just think there are cultural limits to what a polity can absorb at what speed.”

I agree, but I deny that these limits are binding. The U.S. population grew by roughly a factor of hundred during its first two centuries, absorbing members of many disparate cultures in the process. All before the modern age of pre-assimilation! There is no good reason the U.S. couldn’t multiply its population another tenfold over the course of this century. Yes, previous waves of immigration had cultural and political effects, but none were remotely catastrophic. Indeed, the usual view is that they were, on net, good.

11. At the risk of being sanctimonious, Tyler’s piece is a fine example of straining out gnats and swallowing camels. Denying foreigners the right to live and work where they please is at least a thousand times worse than “significant inequities” like being kept out of Princeton or Major League Baseball. Indeed, the way First World countries now treat foreigners is far worse than the way the U.S. treated blacks under Jim Crow. If Tyler clearly admitted this harsh reality, then calmly considered the possibility of open borders, then with heavy heart concluded that it would be disastrous, at least he’d have a coherent position.

12. Next, Tyler revisits the signaling model of education:

If you consider Bryan on education, he believes most of higher education is signaling.  In contrast, I see higher education as giving its recipients the proper cultural background to participate in labor markets at higher productivity levels.  I once wrote an extensive blog post on this.  That is how higher education can be productive, while most of your classes seem like a waste of time.

Yes, school helps people get “the proper cultural background” for work. But as I explained at the time, there is every reason to think that actually working is a much better way to help people get this background. School teaches the school ethic; work teaches the work ethic. While the two ethics are positively correlated, the school ethic also instills some counter-productive cultural background: a focus on “fairness,” and on effort rather than results. Modern college, moreover, is so easy that it probably undermines the work ethic students had when they finished high school.

13. Finally, Tyler turns to the “success sequence“:

On poverty, Bryan puts forward a formula of a) finish high school, b) get a full time job, and c) get married before you have children.  All good advice!  But I find that to be nearly tautologous as an explanation of poverty.

If it’s so tautologous, I urge Tyler to write a series of blog posts promoting this formula. I predict that he will discover that many readers find this “tautology” to be not only false but absurd.

To me, the deeper and more important is why so many cultures have evolved to make those apparent “no brainer” choices so difficult for so many individuals.

What makes Tyler so sure that these choices are “so difficult”? The mere fact that many people fail to follow them? Is that a tautology?

Tyler ends the piece on a classy note:

I should stress that Bryan’s book is nonetheless a very good way to learn economic reasoning, and a wonderful tonic against a lot of the self-righteous, thoughtless mood affiliation you will see on labor markets, even coming from professional economists.

Appreciated!

P.S. Here is Robin Hanson’s complementary response to Tyler.


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